Thread: Own shop at home. Tax deductible?

I'm in a different jurisdiction but I've deducted expenses for home based business for years. In my case the money's not big enough to justify a commercial space. Here the deduction is allowed if you use the tools or other equipment at least 50 percent of the time for a business purpose. The property taxes, maintenance and utilities deductions are proportional to the floor space used for business purposes. For instance, my computer use right now is deductible.
So far this has worked out very well for me.

Cheers,
Rob

P.S., welcome to the site, I think you'll like it here.

You need to talk to your council about that.
Tax deductability is a federal matter. Provided you are making an income you can deduct against it - depending on how much you think you think you will turn over though it may be better doing things for cash if only occasional (that is, a person to person transaction). Things like power and water are done on a proportional basis. I ran a small (home) business for a while and it gets complicated so you are better off talking to an accountant about this side of things.
Council controls land use through zoning. Normally (again you need to speak to them) operating a small business out of your home is allowed but there are rules about what you can and can't do. If you are zoned residential then your house must appear that way - typically no advertising, no noise out of the ordinary (whether that be machines or associated equipment), nothing kept or parked on or adjacent to the premises that would suggest business and so on.
If you rent your house then the owner needs to approve of a business too. If you have the turn over to justify it then an industrial premises is a far simpler option.

Michael

Hi All,
Most of what has already been said is worth noting. I've been self employed for most of my life, like you, initially from home. Producing little or no noise with no on property advertising, just a small newspaper advert with a phone number, all cash transactions.
Then one day I got a surprise visit from the local council people, just to find out what I was actually doing. Now 95% of the work that I did was in other peoples homes, so I wasn't breaking any rules. But I did find out that a neighbor was doing the same business that I was and that he/they had reported me to the local authorities including the tax people. Now I would put this down to the green eyed monster. Unfortunately, for him, I discovered that his reporting of me led to him being prosecuted for tax evasion and benefit fraud. In my case I had employed an accountant from the word go. Even though I'm now retired, I still have the same accountant nearly 40 years later. I remember well a saying that he often made "If I can't save you what I cost you, I'm not doing my job properly."

Good Luck with your venture.

HTH.

Welcome to the world of multiple jurisdictions and regulations. Local, state, federal, insurance and probably one or two others.

Yes of course you can claim legitimate outgoings against business income whether you are working in your garage or in an industrial unit.

If you DIY your tax return you have no costs in making those claims. If you are paying an accountant you need to know that his/her fees in relation to the claim are less then your potential tax saving.

Subject to noise and public disturbance etc I think I home business can be run anywhere. Happy to be corrected if I am wrong. I believe a home business is no longer considered a 'home business' when income exceeds a threshold which I was told is around $20,000. After that it becomes a matter of zoning.

Like Baron I have been self employed most of my working life and what I did do at home do not fit the zoning where I lived but most of work was on site and not at home so never had an issue


Dave the turning cowboy

turning wood into art

As BaronJ has stated, I would start with an accountant.

See an accountant first
Shop around till you find one you get on with too.
You need to be able communicate well with them.

Originally Posted by MilitaryGrade

........
If I were to start my own shop at home (i will make it soundproof) the only problem I am worried about is tax deductions from business expenses from utilities such as electricity.

I have done some research and I found out that these expenses are deductible but only from the portion that is part of your business.......

You may find out that the amounts that you can deduct por a part time business from home are rarely worth the trouble claiming. The tax office may also require you to prove that it is indeed a long term viable business, eg income producing and not just making losses forever. The times are over where you could claim business expenses for producing a dozen cabbages each year. In doubt, better spend the money for a one hour consultation with an accountant.

Also be careful what it might do to your home insurance costs - my policy specifically excludes any home business, and the cost to add this cover can be quite substantial.

You can tax deduct 'operating costs' (a proportion of electricity and gas costs, business phone use, depreciation on capital goods used in the business) for a home based business.

You can also claim loan expenses (so if your shed is 20% of your living space, you can claim 20% of your loan interest)

For the operating costs, you have the option of either doing frequent calculations (or installing a meter that reads for the shed only) OR using the ATO calculated amount which is 34 cents per (business) hour. (assuming 220 x 8 hour days, that's just under $600 a year)

The disadvantage to claiming loan costs is that when you sell your place, you're liable to pay tax proportionally on any capital gains.

https://www.ato.gov.au/Business/Dedu...nning_expenses

When I was working from home, I claimed electricity over what the normal period was before I started, ie if the account was for $550 and the period before starting the business was $220, I would claim the $330. Running a business from home can have it's rewards, but you seem to never get away from work. I did this for 1 year and out grew the shed, it was nice to come home and not think about it.....I still worked long hours, but it was nice to get home.
Make sure you have a good accountancy program, invoicing, expenses, keep all receipts for the ATO, and hand them across to the accountant, with the a copy, to work out GST, ATO don't like not getting their share. DAMHIKT
Kryn

Good afternoon Gents Have done business 1 Living at home with parents on farm,general and automotive repairs 2Living at home with parents sharing a large shed with the old man [major disadvantage no privacy nor respect[meal times always the best time for some one to call with a job]3 Leased workshop advanage get away from work ableit long hours.[disadvantage hi overheads pwer rates rent and insurance.your hourly rate must match your outgoings and your income].4 living and working from farm workshop[advantage low over heads walk to work can didvide the house expenses from shed /shop.not running a car soe times lucky to be used every 2 day make as much noise as you want no complaints no cranky close neighbors to appease] disadvantages no privacy on a farm farm is a four letter word is a 24/7 day all hours is a time farmers break things and need instant service.interruptions no way you can separate as neighbors customers and a social meeting point no pub out there.is seasonal so you do know when things are going to go wrong so you have to be able to adapt also no fun in a big paddock on a wet windy night trying to fix or repair dismantle some thing.Payment is one of the hardest things as farmers never carry cash.]4 live and work in a large factory advantages most of the bills are able to be absorbed. set hours gates shut not home.car get used 1 a week every thing delivered.Priacy can crank up the music and do your own jobs no disturbance. noise no problem is in town and zoned business.plus all the neighbours are friendly and fix their woes and troubles.but most if know am present will text or email.old factory saw tooth roof no need for lights daylight saving time 8.30-9pm.Low overheads
So from over 50 yrs of working in different areas you can get some ideas here.
There is a writing some where that no man[now be person] can be denied from working at his orher chosen trade or profession. Excluding offensive trades ie piggery car wrecking yard crematorium. is ok. It was stated by a Lord Atkin and now without researching all the tiny details fail. Was a british high court deciscion in mid 1800's some these laws still under common law prevail but you need a well read and knowlegeable lawyer. For your info. Cheers all John.

Thanks guys, been a big help!

This might be easier to read

Originally Posted by j.ashburn

Good afternoon Gents Have done business

1 Living at home with parents on farm,general and automotive repairs

2 Living at home with parents sharing a large shed with the old man
major disadvantage
- no privacy nor respect,
- meal times always the best time for some one to call with a job

3 Leased workshop
advanage
- get away from work ableit long hours.
disadvantage
- hi overheads pwer rates rent and insurance.
- your hourly rate must match your outgoings and your income].

4 living and working from farm workshop
advantage
- low over heads
- walk to work
- can didvide the house expenses from shed /shop.
- not running a car soe times lucky to be used every 2 day - make as much noise as you want no complaints no cranky close neighbors to appease]
Disadvantages
- no privacy on a farm
- farm is a four letter word is a 24/7 day all hours is a time
- farmers break things and need instant service.interruptions
- no way you can separate as neighbors customers and a social meeting point
- no pub out there.is seasonal so you do know when things are going to go wrong so you have to be able to adapt also
- no fun in a big paddock on a wet windy night trying to fix or repair dismantle some thing.
- Payment is one of the hardest things as farmers never carry cash.

4 [I think you mean 5?] live and work in a large factory
advantages
- most of the bills are able to be absorbed.
- set hours gates shut not home.car get used 1 a week every thing delivered.
- Priacy can crank up the music and do your own jobs no disturbance.
- noise no problem is in town and zoned business.
- plus all the neighbours are friendly and fix their woes and troubles.but most if know am present will text or email.
- old factory saw tooth roof no need for lights daylight saving time 8.30-9pm.
- Low overheads